Index All Industries Activity, 60, 61 Australian dollar (AUD), 54 Balance of trade, 61 Bank of Canada, 55 Bank of England, 55, 56, 63 Bank of Japan, 55, 60, 62 63 Bar charts, 73 Base currency, 2, 51 Bearish candles. See Candlestick charts Bearish Overshoot, 13 Bearish price breakout, 9, 10 Bearish price moves, 34 36 Bearish trends, 74, 155 Beige Book, 59 Bid-and-ask spreads, 168 Black Wednesday, 63 Bond yields, 58 Breakouts and ascending triangle patterns, 80 bearish price breakout, 9, 10, 76, 77 bullish price breakout, 8, 10, 35, 36, 76, 77 and cup-and-handle pattern, 39, 88 Elliott Wave patterns, 110 failed attempts, 33 35, 38, 49, 78, 85 fake breakouts, 14, 77. See also Head-fakes and Fibonacci extensions, 105, 106, 110 and Fibonacci retracement levels, 104, 105, 110 flag patterns, 81 head-fakes, 77 79 indecisive price moves, 43, 44 and moving averages, 90. See also Moving averages and 1000 PIP Range Transitions, 17 23, 33, 34 pennant patterns, 81 and support/resistance levels, 76, 77 and technical analysis, 52, 72 and Trend Waves, 124 Bretton Woods Agreement, 53, 54 British Bankers Association Mortgage Approvals, 61 British pound (GBP), 54, 63 Bullish candles. See Candlestick charts Bullish Overshoot, 12, 178 Bullish price breakout, 8, 10, 35, 36 Bullish price moves, 34 Bullish trends, 74 Business Sales and Inventories, 58 Canadian dollar (CAD), 54 Candlestick charts, 73, 74 Candlewicks, 73, 74 Capacity Utilization, 57 Carry trades, 54, 62 Central banks, 55, 63, 64 Channel traders, 75 China, and U.S. monetary policy, 64 Commodity currencies, 62 Commodity markets, 62 Commodity prices, 62 Conclusive Wave 3, 117, 118, 122, 124, 127, 130 132, 134, 135, 137, 138, 140, 142, 143 COPYRIGHTED MATERIAL 199
200 INDEX Consecutive Waves, 118, 121 124, 126, 132 138 Construction PMI, 60 Consumer Confidence and Consumer Sentiment surveys, 59 Consumer Price Index (CPI), 56, 61 Consumer spending, 59 Corrective waves, 115 118, 132, 134, 155, 156, 158, 160, 162 165, 170, 172, 173, 181, 188 Countertrend price moves. See Inverse Large Quarter Trades Counting numbers. See Natural (counting) numbers Credit ratings, 64 Cup-and-handle patterns, 84, 87 90 Currency decimalization, 3 Currency pairs, 2, 3, 7, 8, 51, 52, 55, 61 Decimal notation, 1 Decimal numeral system, 1, 3 Decimal whole numbers, 2 Digits, 1 Double bottom patterns, 84 86, 166, 178, 180, 188 Double top patterns, 83 85, 166, 176, 180, 188 Downtrends, 74, 75 Durable Goods Orders, Shipments, and Unfilled Orders, 57, 58 Economic data and fundamental analysis, 51 and Large Quarter Trades, 155 Economic indicators, 55 64 Edge (advantage), 52. See also Fundamental edge, identifying; Technical edge, identifying Elliott, Ralph Nelson, 106 Elliott Wave Theory, 106 113, 115, 116 and Quarters Theory Trades, 147 and Quarters Theory Trend Waves, 115 117, 125, 127, 130, 132 134, 136, 137, 139 End of Hesitation Zone and Large Quarter Trades, 151 153 price levels, 37, 38 support/resistance levels, 37, 38 Entry/exit signals, 102. See also Entry points; Exit points Entry points, 149 Half Point Reversal Trades, 179 181 Half Point Trades, 178, 179 171, 172 Hesitation Zone Trades, 168 170 Inverse Large Quarter Trade, 161, 162, 165, 166 Large Quarter Trades, 150 153, 161 Overshoot Reversal Trades, 176, 177 Overshoot Trades, 174, 175 187, 190 Whole Number Trades, 184, 186 Equity markets, 59 Euro (EUR), 54 European Central Bank, 55 Exchange rates and currency pairs, 2, 3 Existing Home Sales, 57 Exit points, 149. See also Profit target Half Point Reversal Trades, 180, 181 Half Point Trades, 178 171, 172 Hesitation Zone Trades, 168 170 Inverse Large Quarter Trade, 161, 162, 165, 166 Large Quarter Trades, 150 154, 158, 160, 161 Overshoot Reversal Trades, 175 177 Overshoot Trades, 174, 175 187, 190 Whole Number Trades, 184, 186 Extended Waves, 136 139, 141 Fake breakouts, 14. See also Head-fakes Federal Reserve (Fed), 55, 64
Index 201 Fibonacci, Leonardo Pisano, 101 Fibonacci extensions, 105, 106, 110, 111, 128, 129 Fibonacci numbers, 102, 109 Fibonacci retracement measures, 101 105, 110, 111 and Inverse Large Quarter Trades, 163 165 and Large Quarter Trades, 155 and Trend Waves, 123 130, 134, 135, 140, 144 146 Flag patterns, 79 82, 159 Flagpole, 80, 81 Forecasting, 33 44 Foreign exchange reserves, 52 54 Foreign Security Purchases, 61 Fractals, 106 Frost, A. J., 113 Fundamental analysis central bank currency intervention, 63, 64 central bank policies, 61. See also Monetary policy commodities market, 62 credit ratings, 64 and determining fundamental edge, 51, 52, 61, 64. See also Fundamental edge, identifying economic indicators, 55 64 geopolitical events, 51, 61, 63, 155 government debt, 64 interest rates. See Interest rates and Large Quarter Trade opportunities, 154, 155 and Quarters Theory Trades, 148 reaction to global financial crisis of 2008/2009, 62 yield differentials, 61 Fundamental edge, identifying economic indicators, 55 64 fundamental factors, analysis of, 61 63 and Large Quarter Trades, 155 and Quarters Theory, 51, 52, 73 and Quarters Theory Trades, 148 and reserve currencies, 52 55 and role of central banks, 55, 63, 64 Future economic growth, measures of, 57. See also Economic indicators Geopolitical events, 51, 61, 63, 155 GfK Consumer Confidence survey, 60 Golden ratio, 102, 105 Golden section, 102 Gold standard, 53, 54 Government bonds (government paper), 58 Gross Domestic Product (GDP), 56, 57, 59 Half Point, 6, 7 Half Point Reversal Trades, 177 entry point, 179 181 exit point, 180, 181 profit target, 180, 181 Progressive Wave 2, 180, 181 Reversal-Trigger Wave 1, 181, 182 risk/reward ratio, 180, 181 support/resistance levels, 181 trade opportunities, 180, 181 Half Point Trades entry point, 178, 179 exit point, 178 profit target, 178, 179 Reversal-Trigger Wave 1, 178, 180 risk/reward ratio, 178, 179 support/resistance levels, 177, 178 trade opportunities, 178, 179 trade opportunities, identifying, 178, 179 Harmonized Index of Consumer Prices (HICP), 56 Head and shoulders patterns, 84, 86 88, 155, 156, 164, 180, 188, 189 Head-fakes, 77 79 Hesitation Zone, 26 29, 37, 38, 41, 42, 44 49 and Large Quarter Trades, 151 153, 159
202 INDEX Hesitation Zone Reversal Trades entry point, 171, 172 exit point, 171, 172 profit target, 171 Progressive Wave 2, 172, 173 Reversal-Trigger Wave 1, 172 stop-limit price, 171, 172 support/resistance levels, 171 173 trade opportunities, 172 Hesitation Zone Trades, 167 171 entry point, 168 170 exit point, 168 170 profit target, 168, 169 Progressive Wave 2, 170 Reversal-Trigger Wave 1, 170 risk/reward ratio, 168 stop-limit price, 168 170 support/resistance levels, 167 171 trade opportunities, identifying, 167 170, 172 Housing starts, 57 IFO Group Business Climate survey, 59, 60 Index of Leading Indicators, 60 Industrial Production, 57 Inflation and collapse of Bretton Woods system, 54 and interest rates, 55, 61, 62 and M2 money supply, 59, 60 measures of, 56, 57 and role of central banks, 55, 64 Integers, 1, 2 Interest rates, 55, 61, 62 International Bank for Reconstruction and Development, 53 International Monetary Fund, 53 International Trade Balance (balance of trade), 61 Inverse Large Quarter Trades entry point, 161, 162, 165, 166 exit point, 161, 162, 165, 166 profit target, 161, 165 166 Progressive Wave 2, 164, 165 Reversal-Trigger Wave 1, 163, 164 risk/reward ratio, 161 stop-limit price, 161, 162, 165, 166 support/resistance levels, 162, 163 and Three-Day Rule, 162 Irrational numbers, 1 ISM Manufacturing Index, 60 ISM Non-Manufacturing Index, 60 Japanese yen (JPY), 54, 62 64 Lagging indicators, 89, 91, 97, 174 Large Quarter Corrections, 29 31 Large Quarter Points, 5 7 and completion of Large Quarters, 12 15, 31, 33 37, 39 49 price behavior analysis, 33 44 and price volatility, 12 Large Quarters, 4, 5, 7 completion, 12 15, 31, 33 37, 39 49, 140 146, 149, 150 price patterns, 8 10 transitions. See Large Quarter Transitions Large Quarter Trades and End of Hesitation Zone, 151 153 entry point, 150 153, 161 examples, 151 154 exit point, 150 154, 158, 160 161 and Hesitation Zone, 159 identifying trade opportunities, 154 161 Inverse Large Quarter Trade, 161 166 objective of, 149 predetermined risk, 151 premise of, 149 profit target, 150 152, 154, 158 161 Progressive Wave 2, 155, 156, 158, 160, 161 Reversal-Trigger Wave 1, 155, 156, 158 160 risk/reward ratio, 151, 153, 158 stop-limit price, 151 154, 158, 160 161 structure, 150 and successful completion of a Large Quarter, 149, 150
Index 203 support/resistance levels, 154 156, 160 and Three-Day Rule, 152 154, 159, 160 Time Stop, 152, 153 and Trend Waves, 155 161 Large Quarter Transitions, 23 29, 31 and price behavior analysis, 33 44 unsuccessful, 33 37 Leading indicators economic growth, 57, 59 German economy, 60 housing market, 61 Index of Leading Indicators, 60 inflation, 56 technical indicators, 89 of trend reversals, 96 Liber Abaci (The Book of Calculation), 101 Line charts, 73 Losses, limiting, 49. See also Stop-limit point M2 money supply, 58, 59 Madagascar, 1 Major Half Point, 5 Major Large Quarter Points, 5 7 Major Small Quarter Points, 6, 7 Major Whole Numbers, 2, 7 and Large Quarter Points, 5 one-for-one exchange rate as benchmark, 3 and 1000 PIP Ranges, 16. See also 1000 PIP Ranges and PIP Ranges, 3, 4 and Small Quarter Points, 6 Manufacturing PMI, 60 Market cycles and Elliott Wave Theory, 106 113 Mauritania, 1 Monetary policy central banks, role of, 55, 63, 64 and consumer spending, 59, 60 and economic indicators, 55 64 financial indicators, 55, 58, 59 and global equity markets, 59 Japan, 54 quantitative easing, 63, 64 Money supply, 36, 64 Moving average convergence/divergence (MACD), 89, 94 98 Moving averages, 89 98, 156, 173, 174, 181, 182, 189 Nationwide House Price Index, 61 Natural (counting) numbers, 1, 2 New Home Sales, 57 Noise, 14 Non-Farm Payrolls Employment (Employment Stuation), 56, 57 One-for-one exchange rate as benchmark Major Whole Number, 3 One-hour charts, 158 100 PIP Ranges, 3, 5 8, 11 1000 PIP Ranges, 3 11, 16 1000 PIP Range Transitions, 16 23 Open-high-low-close (OHLC) charts, 73. See also Bar charts; Candlestick charts Overbought market conditions, 52 Overshoot Area, 12, 27, 168, 170 Overshoot Reversal Trades, 173 entry point, 176, 177 exit point, 175 177 profit target, 176, 177 Reversal-Trigger Wave 1, 176 risk/reward ratio, 176, 177 trade opportunities, 176 Overshoot Rule, 78, 79 Overshoots, 12 14, 17, 18, 24 26 Overshoot Trades entry point, 174, 175 exit point, 174, 175 profit target, 173 175 risk, 173 risk/reward ratio, 174, 175 support/resistance levels, 173, 174 trade opportunities, 173 175 Oversold market conditions, 52
204 INDEX Parity values, 3 Pennant patterns, 79 82 Personal Consumption Expenditures Deflator Index (PCE Deflator), 57 Personal Consumption Expenditures (PCE) (Personal Income and Outlays), 57 PIP. See Price Interest Points (PIPs) PIP Ranges, 3 11 Positional numeral system, 1 Prechter, Robert, Jr., 113 Price corrections, 11, 22, 23, 29 31, 124 127, 136, 138, 140 142, 146 defined, 1 measurement, 1 patterns, 8 12 pullbacks, 10, 11, 22, 23, 27 29, 37, 44, 140 volatility, 12 Price behavior analysis at Large Quarter Points, 33 44 Price breakouts. See Breakouts Price channels, 75, 76, 162, 165 166 Price charts, 72 74, 89. See also Price patterns Price exhaustion, 37, 38, 49, 121, 142, 143 Price inertia, 24. See also Overshoots Price Interest Points (PIPs), 3 8 Price levels. See also Support/resistance levels double-significance, 42, 43 End of Hesitation Zone, 37, 38 Half Point, 37 39 and Large Quarter Points, 36 whole number preceding a Large Quarter Point, 37, 39, 40 Price patterns Large Quarters, 8 10 Small Quarters, 11, 12 trend-continuation patterns, 79 83 trend-reversal patterns, 79, 83 89 Price targets, 8 Producer Price Index (PPI), 56 Profits, locking in, 49 Profit target, 147, 149. See also Exit points Half Point Reversal Trades, 180, 181 Half Point Trades, 178, 179 171 Hesitation Zone Trades, 168, 169 Inverse Large Quarter Trade, 161, 165, 166 Large Quarter Trades, 150 152, 154, 158 161 Overshoot Reversal Trades, 176, 177 Overshoot Trades, 173 175 187, 190 Whole Number Trades, 184, 186 Progressive Wave 2, 117, 119, 122 124, 126, 127 130, 137 143, 145 in Half Point Reversal Trades, 180, 181 in 172, 173 in Hesitation Zone Trades, 170 in Inverse Large Quarter Trades, 164, 165 in Large Quarter Trades, 155, 156, 158, 160, 161 in Whole Number Trades, 186 Quadruple bottom patterns, 85 Quadruple top patterns, 85 Quantitative easing of money supply, 63, 64 Quarter, defined, 4 Quarters Theory fundamental and technical analysis, use of, 51, 52. See also Fundamental analysis; Technical analysis and Hesitation Zone Trades, 169 and Large Quarter Trade opportunities, 154, 155. See also Large Quarter Trades one-for-one exchange rate as benchmark Major Whole Number, 3
Index 205 and PIP Ranges, 4 6 premise of, 8 12, 147 Quarters described, 4 8 trades. See Trades and Trend Waves, 139 146. See also Trend Waves use of in price analysis of currency pairs, 7, 8 Quarters Theory Trades. See Trades Quote currency, 2, 51 Range traders, 75 Rational numbers, 1, 2 Real Gross Domestic Product (GDP), 56, 57 Real numbers, 1 Relative Strength Index (RSI), 89, 97, 100, 101, 156, 172, 173 Research and analysis, 52. See also Fundamental analysis; Technical analysis Reserve Bank of Australia, 55 Reserve currency, 52 54 Retail foreign exchange market, 51 Retail Sales, 57 Retracements. See Fibonacci retracement measures Reversals, 9 11, 14 16, 18, 36 45, 48, 49 Reversal trades, 148, 149 Half Point Reversal Trades, 177, 179 182 171 173 Overshoot Reversal Trades, 173, 175, 176 182, 187 190 Reversal-Trigger Wave 1, 116, 117, 119 130, 132, 136, 138 141, 143 145 in Half Point Reversal Trades, 181, 182 in Half Point Trades, 178, 180 182 in 172 in Hesitation Zone Trades, 170 in Inverse Large Quarter Trades, 163, 164 in Large Quarter Trades, 155, 156, 158 160 in Overshoot Trades, 176 in 188, 189 in Whole Number Trades, 185 RICS (Royal Institution of Chartered Surveyors) House Price Balance, 61 Rightmove House Price Index, 61 Risk calculation, 147, 149, 151 Risk/reward ratio Half Point Reversal Trades, 180, 181 Half Point Trades, 178, 179 Hesitation Zone Trades, 168 Inverse Large Quarter Trades, 161 Large Quarter Trades, 151, 153, 158 Overshoot Reversal Trades, 176, 177 Overshoot Trades, 174, 175 187 Whole Number Trades, 184, 186 Rounding bottom patterns, 84, 87, 88 Rounding top patterns, 84, 87 89 RSI. See Relative Strength Index (RSI) Services PMI, 60 Sets (of numbers), 2, 3 Signs of strength and price behavior analysis, 33, 34, 37 prices sustaining at or above a Large Quarter Point, 34, 35 and Three-Day Rule, 48. See also Three-Day Rule Signs of weakness and price behavior analysis, 33, 34, 37 prices remaining below a Large Quarter Point, 35, 36 and Three-Day Rule, 44, 49. See also Three-Day Rule Small Quarter Points, 6, 7 Small Quarters, 5 7
206 INDEX Soros, George, 63 S&P/Case-Shiller National Home Price Index, 61 Stochastics, 89, 97 100, 173 Stock market indices, 59 Stop-limit point, 49 171, 172 Hesitation Zone Trades, 168 170 Inverse Large Quarter Trade, 161, 162, 165, 166 Large Quarter Trade, 151 154, 158, 160, 161 Support/resistance levels, 8, 14 breakouts, identifying, 76, 77 End of Hesitation Zone, 37, 38 and Fibonacci extensions, 105, 106 and Fibonacci retracement, 103, 104 Half Point, 37 39 Half Point Trades, 177, 178, 181 171 173 Hesitation Zone Trades, 167 171 Inverse Large Quarter Trades, 162, 163 Large Quarter Points, 33 36 Large Quarter Trades, 154 156, 160 major short-, mid-, and long-term levels, 40 44 Overshoot Trades, 173, 174 price channels of trends, 75, 76 and reversal trades, 148, 149 and stop limits, 151 and Trend Waves, 125 130, 140, 144 whole number preceding a Large Quarter Point, 37, 39, 40 Whole Number Trades, 182, 183, 185, 186, 188, 189 Swiss franc, 54 Swiss National Bank, 55 Tankan survey, 60 Technical analysis, 51, 52 breakouts, 76 79 and Hesitation Zone Reversal Trades, 172, 173 and Hesitation Zone Trades, 169, 170, 172, 173 and Large Quarter Trade opportunities, 154, 155 price charts, 72 74, 89 price patterns. See Price patterns and Quarters Theory Trades, 148 support and resistance levels, 76 technical indicators, 73 79, 89 101 trends and trend cycles, 74 76 Technical edge, identifying and Large Quarter Trades, 155 and price behavior, 72, 73 and Quarters Theory, 51, 52, 73 and Quarters Theory Trades, 148 and technical analysis, 72 technical indicators, 73 79, 89 101 Technical indicators, 73 79, 89 101 Ten-minute chart, 169, 170 Ten-year U.S. Treasury bond yield, 58 Tertiary Index, 60 Three-Day Rule, 44 49 and Inverse Large Quarter Trades, 162 and Large Quarter Trades, 152 155, 158 161 and 190 Time Stop, 49 Large Quarter Trades, 152, 153 Trade ideas, 51, 147, 148 Trade opportunities, identifying Half Point Reversal Trades, 180, 181 Half Point Trades, 178, 179 Hesitation Zone Trades, 167 172 Inverse Large Quarter Trades, 162 166 Large Quarter Trades, 154 161, 166 Overshoot Reversal Trades, 176 Overshoot Trades, 173 175 187 189 Whole Number Trades, 184, 185, 189 Trades and Elliott Wave Theory, 147. See also Elliott Wave Theory entry point. See Entry points
Index 207 execution, 149 exit point. See Exit points Half Point Reversal Trades, 177, 179 182 Half Point Trades, 177 179 Hesitation Zone, 167 171 171 173 Inverse Large Quarter Trade, 161 166 Large Quarter Trade. See Large Quarter Trades objectives, 148, 149, 161, 167 Overshoot Reversal Trades, 173, 175, 176 Overshoot Trades, 173 177 premise of, 149 profit target, 147, 150, 151, 154, 158 161 risk/reward ratio. See Risk/reward ratio stop-limit price. See Stop-limit point structure of, 148, 150, 161 support/resistance levels. See Support/resistance levels trade ideas, 51, 147, 148 trade opportunities. See Trade opportunities, identifying trade setup, 149 types of, 148, 149 182, 187 190 Whole Number Trades, 182 187 Treasury International Capital (TIC), 61 Trend-continuation patterns, 79 83, 161 Trend-reversal patterns, 74, 83 89 Trend reversals, 52, 65, 74, 87 89, 92, 94, 96, 99 101, 109. See also Trend-reversal patterns Trends, 52, 74, 75 Trend Waves Conclusive Wave 3, 117, 118, 122, 124, 127, 130 132, 134, 135, 137, 138, 140, 142, 143 Consecutive Waves, 118, 121 124, 126, 132 138 corrective waves, 115 118, 132, 134 and Elliott Wave Theory, 115 117, 125, 127, 130, 132 134, 136, 137, 139 Extended Waves, 136 139, 141 failure, 119 124, 126, 127, 130 132, 136, 138, 139, 142 and Fibonacci extensions, 128, 129 and Fibonacci retracement measures, 123 130, 134, 135, 140, 144 146 and Hesitation Zone Trades, 169, 170 and Inverse Large Quarter Trades, 163, 164 and Large Quarter completion, 140 146 and Large Quarter Trade opportunities, 154 161. See also Large Quarter Trades overview, 116 118, 147 and price breakouts, 124 Progressive Wave 2, 117, 119, 122 124, 126, 127 130, 137 143, 145 and Quarters Theory, 139 146 and Quarters Theory Trades, 148 Reversal-Trigger Wave 1, 116, 117, 119 130, 132, 136, 138 141, 143 145 support/resistance levels, 125 130, 140, 144 Triangle patterns, 79 81, 83, 105, 161, 172 Triple bottom patterns, 85 Triple top patterns, 85, 86, 170 250 PIP Ranges, 7, 8 Undershoot Area, 12, 13, 15 Undershoots, 12 14, 25 Uptrends, 74 U.S. dollar (USD), 52 54, 62 U.S. House Price Index, 61 U.S. Treasuries, 58, 63, 64, 71
208 INDEX The Wave Principle, 106 Wedges, 79, 83 182 entry point, 187, 190 exit point, 187, 190 profit target, 187, 190 Reversal-Trigger Wave 1, 188 189 risk/reward ratio, 187 support/resistance levels, 188, 189 and Three-Day Rule, 190 trade opportunities, 187 189 Whole numbers, 1, 2 Whole Number Trades, 182 entry point, 184, 186 exit point, 184, 186 profit target, 184, 186 Progressive Wave 2, 186 Reversal-Trigger Wave 1, 185 risk/reward ratio, 184, 186 support/resistance levels, 182, 183, 185, 186 trade opportunities, 184, 185, 189 ZEW Economic Sentiment survey, 60